Correlation Between GM and JD
Can any of the company-specific risk be diversified away by investing in both GM and JD at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining GM and JD into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and JD Inc Adr, you can compare the effects of market volatilities on GM and JD and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in GM with a short position of JD. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and JD.
Diversification Opportunities for GM and JD
Average diversification
The 3 months correlation between GM and JD is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and JD Inc Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Inc Adr and GM is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on General Motors are associated (or correlated) with JD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Inc Adr has no effect on the direction of GM i.e., GM and JD go up and down completely randomly.
Pair Corralation between GM and JD
Allowing for the 90-day total investment horizon General Motors is expected to generate 0.57 times more return on investment than JD. However, General Motors is 1.76 times less risky than JD. It trades about 0.14 of its potential returns per unit of risk. JD Inc Adr is currently generating about 0.05 per unit of risk. If you would invest 3,126 in General Motors on August 25, 2024 and sell it today you would earn a total of 2,727 from holding General Motors or generate 87.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
General Motors vs. JD Inc Adr
Performance |
| Timeline |
| General Motors |
| JD Inc Adr |
GM and JD Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GM and JD
The main advantage of trading using opposite GM and JD positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, JD can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in JD will offset losses from the drop in JD's long position.The idea behind General Motors and JD Inc Adr pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| CEOs Directory Screen CEOs from public companies around the world | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Money Managers Screen money managers from public funds and ETFs managed around the world | |
| Price Transformation Use Price Transformation models to analyze the depth of different equity instruments across global markets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |